Heartland Group Holdings' (NZSE:HGH) Dividend Will Be Increased To NZ$0.065

Heartland Group Holdings Limited's (NZSE:HGH) dividend will be increasing to NZ$0.065 on 16th of March. This will take the annual payment from 4.9% to 6.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Heartland Group Holdings

Heartland Group Holdings' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. Generally, we think that this would be a risky long term practice.

The next year is set to see EPS grow by 6.9%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being which brings it into quite a comfortable range.

Heartland Group Holdings' Dividend Has Lacked Consistency

Heartland Group Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2013, the dividend has gone from NZ$0.04 to NZ$0.11. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Heartland Group Holdings' EPS has fallen by approximately 100% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Heartland Group Holdings will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Heartland Group Holdings has 3 warning signs (and 1 which is a bit concerning) we think you should know about. Is Heartland Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.